Small in size, big on potential

Foreign Direct Investment
| The European | 23rd April 2020

São Tomé and Príncipe is a small island nation in the Gulf of Guinea, off the west coast of Africa. As such, it is surrounded by oil producing countries. It has a land area of approximately 1,000 sqkm, a maritime area of 160,000 sqkm, and a population of around 200,000 inhabitants. Volcanic soil and abundant rainfall yield a great variety of plants, fruit and vegetables. Cacao and coffee are currently its main exports, however tourism and fisheries are quickly growing economic cornerstones. São Tomé and Príncipe is also beginning a transition into a logistics hub and financial services centre for the wider region.

The authorities are working on an ambitious vision to transform the country into a logistics gateway. A regional hub for maritime, shipping and air travel services for the Gulf of Guinea. This vision is based in two main pillars: the construction of a deep-water shipping port and a large airport.

Business climate 

São Tomé and Príncipe’s economy has experienced remarkable growth since 2007, especially in its agriculture, civil engineering, and tourism sectors.

There are many incentives for foreign investors to focus on the area’s potential, including offshore oil exploration, the building of a deep-water port, the airport, and several local projects. In addition, the country enjoys a strategic geographic location, which is ideal to capitalise on the surrounding region.

With Central and West Africa as immediate markets, São Tomé and Príncipe can provide a unique base for the distribution of goods and services across the Gulf of Guinea.

São Tomé and Príncipe does not suffer the same problems of political instability that many of its West and Central Africa neighbours do, and is party to agreements such as the African Growth and Opportunities Act (AGOA) with the USA, and Everything But Arms (EBA) with the EU.

Governance and economic progress

São Tomé & Príncipe has achieved real progress in its governance over the last decade. According to the Ibrahim Index of African Governance (IIAG) the country ranked the 11th in 2015 and 2017 with a score of 60.5, well above the continental average of 50.0. When it comes to freedom, according to the Freedom House’s index, São Tomé and Príncipe ranks 81 of the 175 nations in the index.

The government has worked tirelessly on reforming the political, economic, institutional, and social structures to increase its competitiveness and attract foreign direct investment. There is a need to create, and improve infrastructure in São Tomé and Príncipe. In particular, transport, energy – there is strong potential for hydropower – sanitation and waste disposal.  The main challenge revolve around the expansion and modernisation of its infrastructure, which is geared to supporting the following economic activities.

Agriculture and fishing

Agriculture is a dominant sector for the São Tomé and Príncipe economy, employing 24% of the working population. São Toméa and Príncipe is prized for its high quality cocoa, which is often blended with inferior products to improve their quality. There is also an organic cocoa sector. Other products exported are coffee, vanilla, pepper, and various fruits and vegetables. The potential for high-income agricultural produce is considerable, given the soil quality and climate.

São Tomé and Príncipe has a vast sea territory of about 160,000 sqkm. Biodiversity studies suggest that its waters contain 185 species of fish from 67 families. The most abundant are sea bream, flying gurnard, squid, cornet fish, snapper, grouper and grunt.

Tourism

Tourism is a growing industry for the island. São Tomé and Príncipe is a superb destination for holidays and business conferences, as well as offering great opportunities for eco- and agrotourism. The country has been recently listed in the two last years as one of ten best tourist destinations in the world, by CNN in 2014 and
The Lonely Planet in 2017. CNN selected it as one of 20 global destinations to visit in 2020.

Tourism provides a vast range of investment opportunities, with space for cruise ships, golf, water sports, great resorts, eco-tourism, and business travel among its many attributes.

Potential as a regional hub

São Tomé and Príncipe’s central location in the Gulf of Guinea, combined with the good relations it has with its neighbours, make it an attractive hub for the provision of a range of services across the region. The maritime sector can benefit from services such as tank farms, bunkering terminals and shipyards. There is also strong potential as a regional maintenance, repair, and operations (MRO) centre for aircraft. In terms of ICT infrastructure, the fibre optic submarine telecommunications cable system Africa Coast to Europe (ACE) offers a fast and stable internet connection. São Tomé and Príncipe could operate as a distribution centre for the region and support logistical activities. Other potential hub activities are financial services, healthcare, and education.

Transforming the country into a logistics platform is fundamental for attracting foreign direct investment, increasing the trade dynamics and integrating the country into the regional and global economy. The investment code has been revised and is considered highly favourable. Investors are allowed to hold private property and are guaranteed a fair and immediate compensation in case of expropriation.

Further information

www.apcistp.com

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